NFPs on Friday in focus: will EURUSD see 1.1800 into the weekly close?

October 02, 2020 12:30

Source: Economic Events October 02, 2020 - Admiral Markets' Forex Calendar

Compared to last week, the overall picture in EURUSD hasn't significantly changed over the last several days.

With a drop below 1.1700 the short-term forecast remains short and this could change only if we see a push to above 1.2000.

We are still favouring a stint to below 1.1600 with the currency pair testing the region around a potential mid-term long-trigger at 1.1450/1500.

However, the US-Dollar could see heavier continued selling pressure into the weekly close, which could help Euro bulls achieve a weekly close substantially above 1.1700. This would serve as one of the first signs that the short-term USD correction might be over.

Here are some key points to consider

  • On Tuesday, inflation data from Germany showed a deflationary tendency coming in at -0.2% (YoY)
  • This has been the largest decline since January 2015 and is below market expectations of -0.1%
  • The ECB finds itself in a dilemma, currently (while the USD is kept under pressure from the FED, the ECB is running out of ammunition to weaken the European currency to help weaker EU economies like Italy and Spain, which has resulted in a relatively strong Euro compared to the US-Dollar).

If today's US Non-Farm Payrolls disappoint, here is what we are considering:

  • This would force the US central bank FED to balloon its balance sheet again significantly beyond the 7 trillion USD mark
  • This seems more likely when we consider recent comments from FED chairman Powell in front of the US Congress last week when he said the central bank is committed to helping the economy and that the FED will continue to provide support "for as long as it takes"
  • What also seems likely is that the FED will deliver liquidity to smaller-sized corporations, which could take the USD down, thus giving a boost to EURUSD.

With that in mind, we see the target for the upcoming 6 – 12 months remaining untouched at around 1.2500:

Source: Admiral Markets MT5 with MT5SE Add-on EURUSD Daily chart (between June 26, 2019, to October 01, 2020). Accessed: October 01, 2020, at 10:00 PM GMT. Please note: Past performance is not a reliable indicator of future results, or future performance.

In 2015, the value of the EURUSD fell by 10.2%, in 2016, it fell by 3.2%, in 2017, it increased by 13.92%, 2018, it fell by 4.4%, 2019, it fell by 2.2%, meaning that in five years, it was down by 7.3%.

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